Land Registry privatisation – a foregone conclusion?

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The government's plans to privatise the Land Registry have hit the headlines recently following publication of leaked minutes of a board meeting by the Guardian.

It seems from these minutes that the civil servants who currently run the Land Registry think it is a foregone conclusion that the government will privatise the Registry, despite that fact the government has not made announcement about it as yet.

News of industrial action by civil servants who work at the Land Registry in protest at the privatisation plans has also been in the press and on TV.

Will privatising the Land Registry affect homeowners?

But if you are an ordinary property owner will it make the slightest difference whether or not the Registry is privatised?

The fact is that most property owners know little or nothing about what the Land Registry does or how it works. So from their point of view it would make little difference whether the Registry continues to function as part of the Civil Service or whether its services are provided by a private company.

When purchasing a property buyers are told that they have to pay a 'Land Registry fee' on completion. This is normally paid to the buyer's solicitor, along with Stamp Duty and the solicitor's costs.

The solicitor then deals with 'registration of title' and the buyer may or may not be sent a copy of the new Land Registry title showing the buyer as registered owner of the property.

For most buyers that will be the only time the Land Registry is of any relevance to them, and even then they will have no direct contact with it.

Privatisation could put landowner's titles at risk

But solicitors and other lawyers who handle property conveyancing are concerned that the Registry is no longer concentrating on what should be its core job and that selling it off to a private company could result in property owner's land titles being put at risk.

The Land Registry was first established as a government department as far back as 1862. Its principal job since then has been to register property titles and ownership.

The aim of the Land Registration system was twofold – first of all to make title ownership more secure by providing a state-backed register of titles, and secondly to make selling and buying property easier and quicker.

Once a property title is registered it is said to be guaranteed by the state. Anyone who suffers loss because of an error or omission in the register, or because the register needs to be corrected, will be compensated.

Title registration was originally voluntary and spread quite slowly at first. However it has now become compulsory for any unregistered property to have to be registered when it is sold or mortgaged.

Why an efficient Land Registry is important for all homeowners

The upshot of this is that the vast majority of residential properties now have registered titles and it is rare to find a home that still has an unregistered title.

The land registration system makes conveyancing simpler and more certain. A buyer's solicitor now only needs to see a copy of the registered title.

This contrasts with the conveyancing of unregistered land where the solicitor may have to investigate ownership of the property going back many years by looking at the old title deeds.

When a property is sold the buyer's solicitors will arrange with the Land Registry for the transfer of the title to the buyer. Until the transfer has been registered the property will still be legally owned by the seller, even if the sale was completed some time before.

So the Land Registry has a very important role for all property owners. But it functions invisibly for most of them, because all contacts with the Registry are usually handled by solicitors.

For most of its life the Land Registry has been managed by civil service lawyers. It covered its running costs from the fees charged for registering titles and transfers but was not expected to make a profit.

However that has changed in recent years, and the Registry is now managed as an Agency of the Department of Business Innovation & Skills. The Chief Land Registrar is no longer a solicitor, and the day-to-day management of Land Registry is the responsibility of an Executive Board which is mostly comprised of non-lawyers.

Privatisation plans announced in January – but no official decision yet

It seems that the present government is still pursuing a policy of privatising government services, and the Land Registry is one of the latest agencies to be targeted. A consultation paper was published earlier this year setting out various options, including retaining the existing arrangements.

Although the consultation period has now closed the government has not yet announced any further moves.

However it does seem from the leaked minutes that members of the Executive Board are already working on the basis that there will be some form of privatisation – either a joint venture between the government and a private company, or letting a private company run it as a so-called GovCo.

In other words, preserving the status quo is not an option.

The leaked minutes show that board members believe the government could raise £1. 225bn from entering a deal with a joint venture company, marginally higher than the £1. 1bn GovCo evaluation.

They also indicate that the registry's board has appointed their head of legal services as a company secretary for a new venture but have not yet announced it.

A private company might not provide a better service

Many commentators have pointed out that the Land Registry has a quasi-judicial function, as it has the power of deciding whether or not to register a title. If it decides not to register then a property owner will not legally own the property and would be unable to sell it.

So would it be right for the government to pass such powers to a private company? Perhaps they will be thinking of privatising the courts next!

Concerns have also been expressed that privatising the Land Registry could lead to a more expensive service for consumers. The Registry obviously has a monopoly and a private company could use this situation to increase the present level of fees in order to maximise profits for its shareholders.

Others have suggested that it would be dangerous if a privatised Registry fell into the hands of a company which was already involved in the property market. For example a company which controlled a national chain of estate agents might give that company's clients preferential treatment when registering property transfers.

Traditionally the Registry has only provided title registration services, and so its volume of work is closely connected to the volume of property transactions taking place at any time. The existing management of Land Registry has been looking at ways to extend its services and also to sell information obtained from the registers.

A private company would no doubt want to expand its services even more. But if additional services are seen as being more profitable than providing core registration services that could lead to the latter being downgraded.

Despite all the arguments against privatisation it does seem an article of faith to the present government that private is always better. So it is more than likely that the civil servants are right to think privatisation is a foregone conclusion (and they can expect new jobs which won't be on civil service pay-scales. )

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